US Debt ceiling bill moves to the House as time is running out

The US debt ceiling bill passed it’s first hurdle yesterday from House Rules Committee by a narrow 7-6 vote to approve the bill to be sent to the House. The next hurdle in getting the bill enacted into law before the US defaults on its debt will be judged on the ability of the Democratic and Republican leadership into convincing their members to vote in favour of the bill despite their reservations. Should the bill pass, the next step would be getting the bill through the Democratic controlled Senate. In the US stock markets, we note NVIDIA briefly joining the $1 trillion valuation club, during yesterday’s trading session making it the 5^th US company to ever reach a $1 trillion valuation. Gold’s price benefited from the weakening of the USD and unexpectedly rose breaking the 1955 (S1) resistance line, now turned to support. As the precious metal’s price in its upward movement also broke the downward trendline guiding it, we switch our bearish outlook in favour of a sideways movement initially as the RSI indicator remains above but close to the reading of 50. For a bullish outlook we would require the precious metal’s price to reach if not breach the 1980 (R1) line, a development that would also allow us to draw an upward trendline showing us the limitations of the upward movement. Should the bears take over, we may see gold’s price reversing course, breaking the 1955 (S1) line and aim for the 1930 (S2) support level.

In the Asian markets, we note a continued contraction in China’s NBS manufacturing PMI, spiking concern around the region that the Chinese economy may not be as resilient as was original thought. Furthermore, during RBA Governor Lowe’s speech today, it was indicated that the bank may have finished hiking interest rates and could potentially remain on pause as the Governor was quoted as saying “Monetary policy is restrictive and it’s working.” In the European markets, we note France’s Preliminary HICP rate which indicated that inflationary pressures have slightly alleviated in the eurozone, as the Preliminary month-on-month figure actually turned negative, whilst the Preliminary year-on-year level, inflation also was reduced implying that the ECB may not need to continue with its aggressive rate hiking path in the future.

On a technical level it was characteristic that EUR/USD maintained its downward trajectory, despite the weakening of the USD and is currently about to test the 1.0675 (S1) support line. We maintain our bearish outlook for the pair as long as the downward trendline remains intact and given that the RSI indicator has dropped, nearing the reading of 30. Should the selling interest be maintained we may see EUR/USD breaking the 1.0675 (S1) support line and aim for the 1.0575 (S2) support level. Should the pair on the other hand find extensive buying orders along its path, we may see the pair reversing course, breaking the prementioned downward trendline, in a first sign that the downward movement of the pair has been interrupted and aim if not breach the 1.0760 (R1) resistance level. 

Other highlights for the day:

During today’s European session, we note the release of France’s final GDP rate for Q1, France’s preliminary HICP rate for May, Turkey’s GDP rate for Q1 and Germany’s GDP rate for Q1. On the monetary front, we note that ECB releases the financial stability review while ECB President Christine Lagarde speaks. In the American session, we note the release of Canada’s GDP rate for Q1 and the US JOLTS job openings for April, while oil traders may be more interested in the release of the weekly API crude oil inventories figure. On the monetary front we note that Boston Fed President Collins, Fed Board Governor Bowman, BoE MPC member Mann, Fed Board Governor Jefferson and Philadelphia Fed President Harker are scheduled to speak. During tomorrow’s Asian session, we get Japan’s final manufacturing PMI figure for May, Australia’s capital expenditure for Q1 and we highlight from China the Caixin manufacturing PMI figure for May.     

EUR/USD H4 Chart

Support: 1.0675 (S1), 1.0575 (S2), 1.0495 (S3)

Resistance: 1.0760 (R1), 1.0830 (R2), 1.0890(R3)

XAU/USD H4 Chart

Support: 1955 (S1), 1930 (S2), 1905 (S3)

Resistance: 1980 (R1), 2005 (R2), 2035 (R3)

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